The Evolving Role of Gold as an Inflation Hedge

and gold prices, with a focus on temporal dynamics and regional
differences in Europe and the United States. Using monthly data and
examining lagged effects of up to 4 months, it provides a thorough
analysis of how inflation, measured through the Harmonized Index
of Consumer Prices (HICP), influences gold prices across various
price levels. The results confirm that gold acts as a reliable short-term
hedge against inflation, especially for higher price levels, with the
strongest effects occurring at lag periods of 1.5 to 2 months.
However, over longer lag periods, the relationship weakens
significantly, with cumulative impacts turning negative, particularly
for lower price ranges These findings underscore the temporal
complexity of gold’s effectiveness as an inflation hedge and its
susceptibility to broader macroeconomic influences. A
distinguishing feature of this study is its combination of temporal
analysis with a comparative regional framework, which uncovers
meaningful differences between Europe and the U.S. While both
regions show strong short-term positive correlations between
inflation and gold prices, the U.S. exhibits a sharper decline in
cumulative effects over longer lag periods, likely due to greater
sensitivity to external factors such as monetary policies and currency
fluctuations. The findings are particularly relevant for policymakers
and investors, highlighting the need for strategies that consider the
timing and regional context when using gold as a tool to counter
inflation.